EXHIBIT 99.1
For Immediate Release
CONTACT: MEDIA CONTACT:
James B. Dale, Chief Financial Officer Jerry Daly or Carol McCune
847-228-5401, x361 703-435-6293
jimdale@arlingtonhospitality.com jerry@dalygray.com
ARLINGTON HOSPITALITY, INC. OUTLINES HOTEL DISPOSITION PLAN
SUCCESSFUL COMPLETION EXPECTED TO GENERATE $11.5-$14.7 MILLION IN NET CASH,
$5.8 MILLION NON-CASH IMPAIRMENT CHARGE
ARLINGTON HEIGHTS, Ill., July 15, 2003 -- Arlington Hospitality, Inc.
(Nasdaq/NM: HOST) today provided details of its previously announced strategic
plan (the Plan) to sell approximately 25 to 30 hotel properties over the next
two years. Arlington Hospitality, a hotel development and management company, is
the nation's largest franchisee of AmeriHost Inn hotels. The company currently
owns and operates 62 AmeriHost Inn hotels, as well as nine hotels under other
franchise flags. Cendant Corporation (NYSE: CD) is the franchisor of the
AmeriHost Inn brand. The properties to be sold include 20 to 25 AmeriHost Inns
and six non-AmeriHost hotels that are wholly owned or in which the company has
an ownership interest, and are in addition to five properties currently under
contract, and five hotels sold in the last six months.
The sale of the hotels is an integral part of a focused strategy to shift
Arlington Hospitality's business model and to enhance shareholder value through
the following:
- paying down debt and unlocking equity to be redeployed into higher
return activities, primarily through the development of 80- to
90-room AmeriHost Inn hotels in larger markets;
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- increasing operating cash flow;
- accelerating the generation and realization of sales and
royalty-sharing fees related to the company's agreements with
Cendant Corporation; and
- reducing fixed overhead costs.
Upon successful completion of the sale of the properties in the Plan and
the properties already under contract, the company expects to own or lease 30 to
35 AmeriHost Inn hotels and two non-AmeriHost Inn hotels, excluding any new
hotels developed by the company.
"The properties we have earmarked for sale are high-quality, attractive
assets," said Jerry H. Herman, president and chief executive officer. "The
AmeriHost brand has a proven record of success, even in this challenging
operating environment. Despite the recent downtrend in the hotel industry,
during 2002 and the first quarter of 2003 our AmeriHost Inn RevPAR growth has
outperformed the midscale without food and beverage segment, as reported by
Smith Travel Research, an industry analyst.
"We are selling these hotels to redeploy our assets into activities that
will earn higher returns, such as hotel development for third parties and joint
ventures. The implementation of this hotel disposition strategy is an integral
part of the company's new business plan," he continued.
"By following our plan and reducing our portfolio, through the sales of
the hotels already under contract and those we intend to sell as part of the
Plan, we expect to reduce our debt by more than 50 percent and free up capital,
enabling us to ramp up our development activity,
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primarily through joint ventures. By 2005 we would like our joint venture
development activity to grow to an annual pace of 10 to 15 joint venture hotels.
As we begin to accelerate our development program, our focus will shift to
building larger AmeriHost Inn hotels in larger markets, which we believe will
generate larger returns and larger Cendant fees. We also believe that expanding
to larger markets will help us achieve greater visibility and higher AmeriHost
Inn brand awareness, which, in turn, will benefit Arlington and other AmeriHost
Inn property owners.
In accordance with Statement of Financial Accounting Standard (SFAS) No.
144, "Accounting for Long-Lived Assets," the company anticipates recording an
approximate $5.8 million pre-tax, non-cash impairment charge in the second
quarter of 2003, related to certain of the non-strategic hotels targeted for
sale. However, the company expects to record a total book gain, net of the
non-cash impairment charge, from all other hotels presently under contract and
those slated to be sold, ranging from $1.3 million to $4.5 million, pre-tax,
with actual gains reported as of the date the sale transactions close for each
of the hotels. The company anticipates reporting discontinued operations in
accordance with SFAS No. 144 for all of the non-core, non-AmeriHost Inn hotels
marketed for sale.
"We expect that the sale of the hotels under contract and those Arlington
intends to sell as part of the Plan will generate net cash of $11.5 million to
$14.7 million after retirement of mortgage debt secured by the individual
properties," said Jim Dale, chief financial officer. In addition, Arlington
believes that the sales will improve operating cash flow by approximately $1.6
million, pre-tax, annually.
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The company intends to report the revenue and profit/loss from the sale of
hotels, as well as the reduction of debt, on its financial statements as of the
date the sale transactions close for each of the hotels. Company officials noted
that there is no assurance that these sales will be consummated as anticipated.
Any forecasted amounts from these sales could differ from the final amounts
included in the company's quarterly and annual financial statements when issued.
Furthermore, the forecasted amounts do not represent guidance on, or forecasts
of, the results of the company's entire consolidated operations, which are
reported on a quarterly basis.
HOTELS TO BE SOLD IN TWO GROUPS
Dale noted that Arlington plans to sell the 20 to 25 hotels in two groups,
or tranches. "We expect to sell the first tranche of approximately one-half of
the hotels within nine to 12 months, followed by a second tranche of the
remaining properties." The proposed sales under the Plan are in addition to
scheduled sales of five hotels for which contracts already have been signed.
The national hotel brokerage firm of Thompson Calhoun Fair (TCF) has been
engaged to market most of the hotels Arlington intends to sell as part of the
Plan. Based in Atlanta, TCF specializes in the mid-tier segment and has sold
more than 300 hotels in more than 35 states with an aggregate value in excess of
$3 billion. Information on the hotels for sale and on TCF can be found on the
Internet at www.tcfhotels.com, or by calling Mark Fair at 404-995-8970.
RECENT SALES AND SALES/DEVELOPMENT PIPELINE
This year through June 30, 2003, Arlington has completed the sale of three
wholly owned AmeriHost Inn hotels, resulting in net revenues of $9.0 million,
net book gain of $1.7 million
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and a reduction in debt of $5.6 million. In addition, the company facilitated
the sale of one AmeriHost Inn hotel owned by a joint venture and one
non-AmeriHost Inn hotel owned by a joint venture. The company also has five
additional hotels under contract to sell.
Year to date, the company has opened three wholly owned hotels and one
joint-ventured property and also has several additional hotel projects under
development.
ABOUT ARLINGTON HOSPITALITY, INC.
Arlington Hospitality, Inc. is a hotel development and management company
that builds, operates and sells mid-market hotels, primarily under the AmeriHost
Inn brand. Currently, Arlington Hospitality, Inc. owns or manages 71 properties
in 17 states, including 62 AmeriHost Inn hotels, for a total of 5,224 rooms,
with additional AmeriHost Inn & Suites hotel under development. The AmeriHost
Inn brand is a mid-market, limited service hotel brand with approximately 100
properties located in 20 states.
This press release may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are statements that
are not historical, including statements regarding management's intentions,
beliefs, expectations, representations, plans or predictions of the future, and
are typically identified by words such as "believe," "expect," "anticipate,"
"intend," "estimate," "may," "will," "should," and "could." There are numerous
risks and uncertainties that could cause actual results to differ materially
from those set forth in the forward-looking statements including, without
limitation, risks relating to the development and operation of hotels, the
timing, consummation and final terms of hotel sales, the availability of capital
to finance growth, geopolitical events, competition and the historical
cyclicality of the lodging industry. All forward-looking statements included in
this press release are based on information available at the time of the
release, and Arlington Hospitality assumes no obligation to update any
forward-looking statement.
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